MeadWestvaco To Shut Down 4 Paper Machines, Takes Restructuring Charge
Press release from the issuing company
STAMFORD, CONN. - March 4, 2002 - MeadWestvaco Corporation (NYSE: MWV) today announced plans to shut down permanently four coated paper machines and related equipment. These actions will take effect beginning April 1, 2002, and be completed by May 31, 2002. MeadWestvaco Corporation was formed on January 29, 2002, through the merger of The Mead Corporation and Westvaco Corporation. The company has about $8 billion in annual sales and operates in four key segments - packaging, coated and specialty papers, consumer and office products, and specialty chemicals.
"These actions reflect our determination to move rapidly to capture the benefits of this strategic merger," said John A. Luke, Jr., president and chief executive officer of MeadWestvaco. "With the merger and these steps, we are creating the highest quality and most efficient coated papers business in North America."
Three coated paper machines and associated equipment will be permanently closed at MeadWestvaco's Chillicothe, Ohio, mill and one coated paper machine at the Luke, Maryland, mill will be permanently shut down. The restructuring will result in the elimination of about 350 positions in Ohio and approximately 75 positions in Maryland. It is expected that, over time, production will be transferred to more efficient machines elsewhere in the company's coated papers system.
"The actions we announced today will provide us with a lower cost and more efficient coated papers platform," said Ian W. Millar, president of MeadWestvaco's Papers Group. "The closure of high cost equipment is critical to our plans to create a strong position in our markets, especially in the face of weak economic conditions and import competition resulting from a strong U.S. dollar. The actions we are taking will not change our grade lines and product offerings."
MeadWestvaco had announced plans, following the merger, to take actions in the first two years, leading to annual synergies of $325 million. Of the $325 million in synergies, $125 million is expected to come from optimization of the Papers Group. Specific activities to achieve these synergies will include the elimination of high cost manufacturing equipment and the streamlining of processes and staffing -- part of that number is included in today's announced actions. In addition, $70 million in synergies relates to purchasing and logistics, $90 million to corporate overhead and technology, and $40 million to the packaging segment.
The announcement today follows the shutdown in October of 2001 of Westvaco's Tyrone, Pennsylvania, coated papers mill and sale of Mead's Menasha, Wisconsin, based Gilbert Paper Company and selected assets in November 2001. The earlier actions and today's steps together will result, when fully implemented, in more than half of the $125 million in annual synergies expected from the Papers Group.
MeadWestvaco's Papers Group produces coated papers for catalogs, annual reports, magazines, text books and coffee table books; carbonless papers for business forms and receipts; digital papers for commercial and desktop printing; and labels for food and beverages.
Restructuring and Other Merger Related Charges
MeadWestvaco also announced today that it expects restructuring and other merger-related costs taken in 2002 to approximate $100 million, of which about $40 million is expected to be taken in the first quarter. Of the total estimated $100 million in charges relating to the former Westvaco operations, about 70 percent or $70 million are expected to be non-cash charges. The total estimated charges include $12 million attributable to the shutdown of the Luke, Maryland, paper machine. Under merger accounting rules, charges for the writedown of assets and severance relating to the former Mead Corporation, including the paper machine shutdowns in Chillicothe, Ohio, are recorded in purchase accounting and do not affect current earnings.
Company-wide workforce reductions, including those in the Papers Group, are expected to be about 900 during 2002. This is in addition to reductions of 525 in connection with the closing of the Tyrone, Pennsylvania, mill and the sale of Gilbert Paper.
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